Breaking milestones

A few interesting milestones were broken (or nearly broken) during yesterday's trading session:

1. The Dollar hit an all-time low against the Euro yesterday ($1.45). Today, it seems to be reversing its 7-day decline.

2. Gold tends to move inversely to the dollar, and it nearly broke $800 yesterday.

3. Oil hit an all-time high yesterday ($96) and looks like it might break $100 soon.

4. Google broke $700 yesterday, stubbornly defying its sky-high valutaion (P/E ratio) and mystifying "fundamental" investors everywhere.

Because the economy and the financial markets are developing so quickly, we should take these "barriers" with a grain of salt. Nonetheless, we should realize that these trends have been assisted by the Fed's rate cuts. A decrease in interest rates tends to bolster equity prices and oil prices and lower the price of the dollar.

Therefore, these milestones indicate that the Fed is now faced with an interesting dilemma: how to protect the financial markets from the recent downturns in the housing market without crushing the US dollar and fostering high oil prices and inflation.

In short, let's all be glad not to be Ben Bernanke right now.